News

Editorial: Voters want a Costco, so let's move forward

City still negotiating with developers on cost-sharing for infrastructure improvements; council hearing no earlier than July

by
Pleasanton Weekly editorial board

We are at a critical juncture with regard to the future of the Johnson Drive Economic Development Zone (EDZ) on Pleasanton's northwest side.

This 40-acre parcel, once home to a Clorox research center, was in essence, the topic of ballot Measure MM in November. Brought to voters by a successful signature-gathering campaign, Measure MM sought to amend Pleasanton's General Plan to permanently restrict retail development in this area to buildings no larger than 50,000 square feet -- and thus preventing a Costco, after the company signed a letter of intent to build a store at the site.

The measure also sought to stop the City Council-appointed Johnson Drive EDZ task force from continuing its work on determining the best uses of vacant land on Johnson Drive, an industrial-zoned street highly visible and commercially appealing as an Interstate 680 frontage road, with a FedEx regional center at one end and Home Depot on the other.

Measure MM was resoundingly defeated by 62.63% of voters, which could be construed as voter approval of building a Costco there. We also supported the building of a Costco in our Oct. 7, 2016, editorial, "Vote No on Measure MM" and continue to believe the planned development is best for the city and its residents.

For months now, city staff, representatives of Costco and developer Nearon Enterprises have been negotiating a proposed agreement about how much each will pay for necessary infrastructure improvements such as traffic enhancements.

Once an agreement is reached, city staff has to outline financing options to pay for the city's share and present those to the City Council for consideration during a public meeting -- which City Manager Nelson Fialho said will happen no earlier than July. Only after that point would the city be in position to begin public review of the full EDZ plan outlining environmental analysis at the site and detailing rules for how development would occur there.

Options being considered here are those commonly used by cities around the country to finance such public infrastructure efforts associated with development.

The city could borrow internally from the approximately $195 million in total cash and investments available in city-controlled funds, or the city could take a conventional bank loan.

Another option is a sales tax sharing agreement, in which Costco fronts the city's portion of the cost for infrastructure improvements and a percentage of sales tax generated by Costco annually is used to pay back the company.

To explain this last option, let's look at a hypothetical situation in which the total infrastructure improvements cost $1 million. The city agrees to pay half -- $500,000 -- with a 60%-40% sales tax split annually up to 20 years.

Hypothetically, let's say the sales tax revenue due to the city is $100,000 in the first year. With the sales tax sharing scenario, the city would keep $60,000 while Costco would receive $40,000 as payment for fronting the city's share of the improvements. The more sales tax revenue produced, the quicker the debt is paid.

Keep in mind, these infrastructure improvements have to be made regardless of what type of development is built at the site.

Several development options have been suggested for the parcel, including a large fitness center and a strip mall, while others would prefer just leaving the area as it stands and not building anything. We believe leaving the area as is -- vacant, except for piles of debris here and there from the razing of the Clorox building -- is not an option because the opportunity cost is too great.

Costco and other large businesses, like proposed hotels and recreational venues, belong there to add to Pleasanton's sales tax base and employment opportunities. These businesses will not compete directly with our downtown businesses, nor will they create extra traffic congestion during peak commute times because they typically aren't as busy then.

The first domino -- an agreement on infrastructure costs -- needs to fall to get this on track. Because there is still no agreement, we could be months from moving this forward, according to Fialho.

"Assuming we get something in June we can agree on, we'll have the finance discussion with the City Council within 30 to 45 days," he said. "Assuming some type of agreement by the City Council in a public meeting, then the process for considering the EDZ would kick-off, first by the Planning Commission and then the City Council."

A council-endorsed financing option would be wrapped into the final EDZ plan, and consideration of that final plan would take three to four months, he added. So, if we are being optimistic that an agreement is reached this month, it would be October and possibly November before the process for EDZ consideration starts.

No financing agreement means no Costco, which means no Johnson Drive EDZ plan. While some might cheer this, we harken back to the public outcry that stopped the Home Depot from being developed on Stanley and Bernal. Now there is high-density housing there.

We would like to see an equitable distribution of cost between the city, Costco and Nearon to fund necessary infrastructure improvements and an agreement in place soon so the city can move forward with public vetting of the EDZ plan and Costco project.

Comments

27 people like this

Posted by Sam
a resident of Another Pleasanton neighborhood
on Jun 1, 2017 at 10:24 pm

I realize the meaning of the vote last year on MM, but that doesn't change my opinion. I'm still against a Costco in that location, for all the reasons that have been hashed out before - the back-door dealing with the city, the additional traffic, the increased infrastructure costs. What a bad idea.

"No financing agreement means no Costco, which means no Johnson Drive EDZ plan. While some might cheer this, we harken back to the public outcry that stopped the Home Depot from being developed on Stanley and Bernal. Now there is high-density housing there."

This paragraph makes it sound like inviting more businesses into Pleasanton will somehow circumvent the building of more high-density housing. If so, then the logic seems a bit backwards. The reason that the courts forced Pleasanton to build more housing, including high-density housing, is that the jobs-to-residents ratio in Pleasanton got too lopsided. As I recall, the jobs per adult resident of Pleasanton ratio got up to a ridiculous ratio of 1.6 Pleasanton jobs for every adult resident of Pleasanton because of the city's overly business-friendly and housing-hostile development philosophy. So, no, building a Home Depot on Stanley and Bernal would not have prevented high-density housing from being built in Pleasanton. In effect, the courts would have looked at that new business and said to Pleasanton: "Hey, Pleasanton! Congratulations on that new business you've got there! Now where are you going to house all the people who are going to be working at all these new Pleasanton jobs within your city limits?"

Posted by LanceM
a resident of Another Pleasanton neighborhood
on Jun 2, 2017 at 9:55 am

"I'm still against a Costco in that location, for all the reasons that have been hashed out before - the back-door dealing with the city, the additional traffic, the increased infrastructure costs. What a bad idea."

Sam - if there was already a deal in place as you, and others, claim, then why isn't the deal already approved by the city. What is taking so long?

What increased infrastructure cost? Increased from what? As pointed out in this article if there is any development there the infrastructure needs to be addressed. So I guess you are in favor of just leaving it a pile of dirt? Maybe we should also bulldoze all the houses in your neighborhood, that will help traffic. Perhaps we just get rid of all of Pleasanton, that will also reduce traffic in the area.

Posted by Kathleen Ruegsegger
a resident of Vintage Hills
on Jun 2, 2017 at 10:33 amKathleen Ruegsegger is a registered user.

For some of us, the question was never "to Costco or not to Costco," it was the loans--taxpayer dollars--to Costco.

And Sam is correct about why we have high density housing. The Governor will be back; he's already been talking to groups who want more high-density housing throughout the East Bay. It's great that housing costs are on the rise if you are already sitting in one of them--not so much for others who want to live closer to where they work.

I voted against MM as I think a Costco would be fine there and I was told that negotiations have not been completed, including any public subsidies. That would all be coming to the city council for public hearings. While I am fine with Costco, I am NOT fine with the public subsidies, unless the finance agreement has the subsidies being paid off in less than 3 years. In my opinion, anything longer than 3 years is just gambling as we do not know what the future will bring, especially with Amazon in the mix. It has been many months since I have been to a Costco since I know like the convenience of Amazon, especially with the Prime account (like a Costco membership) where I get free 2-day delivery. I expect in less than three years the Prime account will be same-day free delivery. If the city and Costco gets to am impasse in this, perhaps Costco can bond themselves in a way that if the subsidy is not paid off in a reasonable amount of time, we get to call the bond.

Reading the editorial it sure sounds like this was written by the Chamber of Commerce who has never seen a development they did not like.

In the article it states "The city could borrow internally from the approximately $195 million in total cash and investments available in city-controlled funds, or the city could take a conventional bank loan." No fricken way! That money is for post-retirement liabilities as well as capital replacement fund. Those funds should not be jeopardized to help finance a private corporation.

The headline is also incorrect. The voters did not want a Costco. Rather they wanted the process to continue which may, or may not, include a Costco but they wanted the public process to continue. I do think the city did hear from enough concerned residents on the amount of subsidies that were being discussed so they are negotiating with Costco on this now.

Posted by sumati
a resident of Kolb Ranch Estates
on Jun 2, 2017 at 12:02 pm

Local- your assessment of the voters will is inaccurate. All of the yes on MM signs, websites etc specifically stated NO ON COSTCO. Its disingenuous to state otherwise. I think the headline is an accurate depiction of the vote and the voters mind set.

I don't think I was alone in voting NO on MM because I was interested in the council continuing discussions with Costco AND was hopeful the city would not continue with the unreasonable public subsidy.

Posted by Vis-it-tor
a resident of San Ramon
on Jun 2, 2017 at 1:41 pmVis-it-tor is a registered user.

oh please. There is no signed deal. There is no signed lease. And, let's be clear, the lease would be between Costco and developer, not the city.
Hold up was FREE parking for a business and near monopoly on gas. When those 2 did not gain traction it became the 'deal' the city has not signed, voted or anything on. Oh, let's not forget the traffic (reality would be less regional traffic). Oh, and then the Trump type attack that the mayor had a few costco shares in a mutual fund. even THAT fizzled.
2/3 of voters (Pleasanton) did not care for any of the issues brought up.
Shoppers to a NEW Costco won't care about any 'deal' the city may or may not make. The parking lot will be FULL. And hopefully the Danville location will have FEWER customers (really, all I care about).
Build it.

Come on Folks, our youngsters need jobs ad this is a perfect place for them to start. It will bring more money into Pleasanton. Quit hashing it out ad get the building up and running. Pleasanton needs a Costco, why give Livermore and Danville our hard earned cash when we can start doing for our own community. We voted for it, let us have our vote count.

Posted by Kathleen Ruegsegger
a resident of Vintage Hills
on Jun 2, 2017 at 3:59 pmKathleen Ruegsegger is a registered user.

Voting statistics for MM: 42,701 registered voters in Pleasanton; 21,532 voted No; 12,849 voted Yes; 8,320 did not vote. So a 62.63 percent No vote was less than 2/3 by 4%. Some numbers should be precise. I don't think anyone should speculate about why any individual voted one way or the other. So maybe the title could have been: What's the hold up with Costco?

Build it now! Please. Thanks to editorial board to keep this issue front and center. Our city council has no problem developing housing, so they can get it done and a majority voted to put a Costco there! Whats the hold up? Perfect location and great company. Costco, get more active in making this happen.

Posted by sumati
a resident of Kolb Ranch Estates
on Jun 2, 2017 at 4:34 pm

Yes lets be precise out of 34381 people who voted 62.628% voted no and 37.372% (three digits precise enough?) voted yes. The other 8320 did not vote - either because they did not care or had something better to do. Don't know the reason to point out that the no vote was less than 2/3 of all potential voters by 4% other than another agenda... especially since this vote did not require a 2/3's approval. The vast majority of the pro-mm positioning was anti-Costco (including yard signs etc with a circle with a slash through it over COSTCO). Clearly if MM had passed- well the people would have spoken that they don't want a Costco (or any other big box retailer).

Posted by Kathleen Ruegsegger
a resident of Vintage Hills
on Jun 2, 2017 at 4:59 pmKathleen Ruegsegger is a registered user.

sumati, absolutely precisely, 2/3 of voters didn't vote no, 2/3 of those voting voted no. I voted Yes, but not because I didn't want a Costco; I don't particularly care what goes on that land. As a taxpayer, however, I don't want to lend money to Costco or anyone else for any length of time. So this statement: "well the people would have spoken that they don't want a Costco (or any other big box retailer)" is incorrect for my individual vote. Who knows, I might join again if Costco gets built.

Posted by Vis-it-tor
a resident of San Ramon
on Jun 2, 2017 at 6:54 pmVis-it-tor is a registered user.

KR: good grief, if one says 2/3 voted no they are more right than incorrect. the simple fact is MM lost by a landslide. Is that better? the voting folks want a costco and that is very very clear. The REGION wants another costco.
Just a few here and a business or 2 didn't want a costco.
You know this comment area gets things wrong more often than not. Need I mention Lund Ranch debacle?

Posted by Kathleen Ruegsegger
a resident of Vintage Hills
on Jun 2, 2017 at 9:11 pmKathleen Ruegsegger is a registered user.

We don't know the vote was FOR a Costco. Here is the quote I take exception to: 2/3 of voters (Pleasanton) did not care for any of the issues brought up No matter; it happens or it doesn't. Again, my issue is subsidies, not if it is a Costco or a Nordstrom Rack.

Posted by Flightops
a resident of Downtown
on Jun 2, 2017 at 10:58 pmFlightops is a registered user.

It all boils down to the fact that the minority lost the vote along with Blacktie Limo and deep pockets, thieving Shell oil so now the city needs to step up and work out an agreement with Costco, the developers, and us taxpayers with something that we can all live with which probably means "we" will be hiring more consultants thereby dragging the whole process a lot longer and costing us more money. Starting to sound like the 2 new tennis courts at valley and hopyard, in less than a year the construction price has doubled, and the city is hiring a construction management firm for the project for an additional $56,880 because they say the city engineering dept has a heavy workload??? Sounds like they need a consulting firm to study time management at those offices downtown.

Posted by Vis-it-tor
a resident of San Ramon
on Jun 3, 2017 at 7:47 amVis-it-tor is a registered user.

KR: gosh, nearly 2/3 of those who decided to go out and vote overwhelming said NO to blocking a Costco type (sized) retailer at THAT location. Is that better? As has been posted since day 1: there is no signed deal. No deal has been voted on by the city council. There is no signed lease with Costco. And, keep in mind, the city is NOT the landlord.
And no matter what is agreed to, the parking lot will be full and a majority of the shoppers will reside in Pleasanton. And 'not many' will care about any 'deal'; they will be happy they have a closer Costco than what is currently available. This forum was wrong and it wasn't the first time. Makes you wonder, huh?

Posted by Dave D
a resident of Valley Trails
on Jun 3, 2017 at 8:48 am

What I wonder about is why you're so concerned about a Costco in Pleasanton when you don't even live here ! You've already got one about 2 miles from San Ramon now go beat the crowd and get your $ 1.50 hotdog and chocolate Frosty

Posted by Kathleen Ruegsegger
a resident of Vintage Hills
on Jun 3, 2017 at 9:02 amKathleen Ruegsegger is a registered user.

Visitor, Not really. I understand the facts, including the potential for subsidies--ones that won't come out of your pocket if you are in San Ramon. If "'not many' will care about any 'deal'" involving taxpayer funds, well, that's a very sad day, every day, and spread out over many years. "they will be happy they have a closer Costco"--sure, but it's hard to look at a privileged society that thinks seven miles is a burden. So if there aren't subsidies, and/or Costco doesn't sign, I *wonder* what we'll have then.

If it were a simple matter of Costco just leasing some suitable existing space and moving in then there wouldn't be too much argument here. But that's not the situation. Big infrastructural improvements will have to be made to accommodate the large Costco store. If Costco itself were willing to pick up the bill for all those infrastructural improvements then, again, there wouldn't be much of an argument here. But that's not the situation, either. Costco lawyers are going to go head-to-head against Pleasanton city lawyers to see how much financial burden each side is going to bear. In a contest like that, my money is on the Costco lawyers taking the Pleasanton city lawyers to the cleaners. That cheap Costco gasoline may turn out to be much more expensive than you thought if you're a tax-paying Pleasanton resident. In negotiations, it's never a good idea to appear to be too eager to make a deal.

@Michael Austin: "Costco has a greater need to build a store in Pleasanton then Pleasanton has the need for Costco to be built."

Maybe and maybe not. But I absolutely guarantee you that that is one thing that the Costco lawyers will never, ever, ever say during their negotiations with Pleasanton. They will, however, point out the fact that many Pleasanton residents will be very upset with the city of Pleasanton and with the lawyers representing the city if the deal falls apart, and they will use that to leverage their position to the maximum during negotiations. The Costco lawyers are good lawyers, and like all good lawyers they play hardball for their client. Would you expect any less from your own lawyer?

Posted by Jake Waters
a resident of Birdland
on Jun 3, 2017 at 1:43 pmJake Waters is a registered user.

The debate is over. The vote is in. It is done. It is time now to start the tractors and move the dirt. For those who are still arguing and debating, no matter your dismay, disenfranchisement, dislike, disillusionment, disgust, and every other 'd' word, you have to live with the fact that it is going to be built.

Posted by Johnson Dr Business Owner
a resident of Stoneridge
on Jun 3, 2017 at 2:46 pm

I've spoken with several people that thought voting No was against the Costco. I'm not sure they would have won if it had been clearly written. Many people also told me that Costco was paying for the infrastructure improvements, which I knew was incorrect. Never the less, let the dust fly and the pyramids come down!

Pleasanton needs Costco now! I would be fine with the city paying all the infrastructure costs. Costco in pleasanton is about quality of life for me, it would save me time on the freeways every week. 20k households in town are members! Get it done!

The infrastructure costs for a Pleasanton Costco run up to $26 million from what I have read. Given your own estimate of 20,000 households in Pleasanton using Costco, that works out to a cost of about $1300 per household. That's a mighty expensive tank of gas.

I would save about $10 a week if I could buy Costco gas, 500 a year. 1300 doesn't seem too much to me given a 2 or 3 year payback. But my main reason is quality of life, would save me about 30 minutes in the car every trip.

Posted by Vis-it-tor
a resident of San Ramon
on Jun 3, 2017 at 6:17 pmVis-it-tor is a registered user.

I think what has been posted here over and over with regards to Costco is those driving farther away currently would be happier for a closer location. Has nothing to do with being 'privileged' but more to do with convenience. And keep in mind less traffic region wise. A good benefit, no?
End of day a shopper or potential shopper won't think about what the City, the developer or anybody has been paid/pay subsidy wise. Be happy not all families even need to do Costco type shopping, so not like it will create a stampede of brand new costco members. And keep in mind it won't just be Pleasanton residents shopping at a possible new Costco.

I have always signed myself as "Sam from Oak Hill" and never as a Sam from any other neighborhood. Has it ever occurred to you that the other "Sam"s are completely different people unrelated to me? Or do you think that the name "Sam" is such a rare and unusual one that no one else could possibly think of using it?

Also, did it occur to you that IF I wanted to sign onto these forums as another "persona" that using the EXACT SAME name of "Sam" and merely changing the name of my neighborhood would be a ridiculously transparent and ineffective cover?

If you and other very enthusiastic supporters of a Pleasanton Costco are willing to voluntarily pay $1500 out of your own pockets to make a Pleasanton Costco happen and leave the rest of us out of it, I have no objections.

Sam, Its hard to take that last comment seriously. We are talking about public infrastructure improvements, no a private drive for Costco members. That being said, If I invested 1500 and could get 500 back every year, that's a pretty phenomenal rate of return! I'd have to be an idiot not to do it, over and over if I could.

My wife and I both work full time and we have two young children. Our time is precious with our kids and 1-2 hours saved every month is a big deal for us. It means more park time, trips to the library, or just time to relax as a family. Even without the clear economic benefit to our household budget it is still a no brainer, at least for us.

If I can save 10 miles in the car twice a month thats about a gallon of gas. Multiply that by 20,000 members. 20,000 fewer gallons burned in the Tri-valley every month, that's good for everyone's air.

I would be thrilled if the city leaders can make it happen, if you are reading this please do everything you can. Its not too often that investment of public resources into a project is such a clear win in terms of economics, community quality of life, and the environment.

All I'm saying is that you can only speak for yourself when saying that you would be willing to pick up the entire estimated bill of about $1500 per household for infrastructure improvements for Costco. I'm a Costco customer, too. Yeah, it would be convenient to have a Costco in Pleasanton. I'm not categorically opposed to a Pleasanton Costco. I just don't want them or any other store to get a sweetheart deal from the city at my expense.

Oh, and as for "investing" 1500 and getting back 500 per year, yes, that is a phenomenal amount of return. But you're already getting that $500 in annual savings regardless by going to the Livermore or San Ramon Costco, remember?

Yes I agree, I can only speak for myself and my view of the situation. Also, I am not saying that we should not negotiate for the best deal we can get, that's just responsible government. I think both sides should seek a fair deal in recognition that welcoming Costco will be a win for the city and for Costco. In other words, we don't need to roll out a red carpet, but we also don't need to put up a red velvet rope. Lets make a deal and welcome Costco as a corporate citizen.

Just to clarify, I dont get the 500 savings annually now because Costco is too far from my driving patterns to stop in for gas. I have two cars and I dont make weekly trips to Costco for gas in both of them. My estimate of $10/week savings was based on an estimate of 5 or 6 additional trips to Costco just for gas, plus the reduced gas usage because of less miles driven for my regular Costco trips.

If the Johnson Dr. deal falls through, my bet is Costco is eyeing the 680/84 interchange, outside of Pleasanton city limits!

Nominations due by Sept. 17
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